Lagging economy points to flat tube market outlook

While industry observers views on the future are clouded, the consensus is that the mechanical tubing market will be largely unchanged for the rest of this year and into next year, with a slight uptick possible depending on what direction the domestic and global economies take.

Right now, mechanical tubing demand is OK. It isnt great, but it isnt atrocious either. But it has been weakening a little in the past few months, said William A. Wolfe, executive director of the Steel Tube Institute of North America. The fact that mechanical tubing is used for some of the stronger end-use applicationsincluding the automotive, heavy equipment, and oil and natural gas sectorshas helped buoy demand somewhat.

Nevertheless, the recent slowing of the domestic and global economies is affecting the market, Paul Vivian, a partner at Preston Pipe Report, Ballwin, Mo., said. I see mechanical tube turning flatter. It will continue to grow, but by smaller amounts.

Mechanical tubing shipments through July rose 12.1 percent compared with the first seven months of 2011, but they fell month on month in both July and June, Vivian said. That is partly due to seasonal factors, with July usually the weakest month for mechanical tubingeven weaker than the slowdown for the holidays in late November and December, he said.

But all the uncertainty in the marketplace is viewed as exacerbating the situation.

Manufacturing as a whole continues to struggle, said Christopher Plummer, managing director of Metal Strategies Inc., West Chester, Pa.

Especially concerning was the August drop in the Institute for Supply Managements manufacturing purchasing managers index to its lowest reading since July 2009. At 49.6 percent, it was the third consecutive month that the PMI was below the 50-percent dividing line representing a contraction or expansion of the U.S. manufacturing economy.

Uncertainty about the global economy, as well as U.S. fiscal policy amid the ongoing presidential election, has resulted in a very cautious business climate for most steel products, including mechanical tubing, Plummer said.

We have to wait for more clarity, Wolfe said.

No matter who wins the election, I think we will see more of what we are seeing today, Vivian said, predicting that after a seasonal bump, the market will be relatively flat through next year. At best it will be up 4 to 7 percent next year.

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